Car sales likely to rise after two years of decline

Recovery may come in the second half, spurred by new government and festive demand

Car sales, which have been declining for two consecutive years, may post a marginal rise this fiscal on economic rebound that is expected after the new government comes to power, experts said.
Car sales declined 4.56% for the second straight year in fiscal 2014 as auto companies sold 17,86,899 cars compared with 18,74,055 units sold in the previous fiscal, according to Society of Indian Automobile Manufacturers (SIAM).

While the overall passenger vehicles (PVs), which include passenger cars, utility vehicles (UVs) and vans dropped 6.05% in the last fiscal, UV sales fell 5.01% and vans 19.58%.

Two-wheelers, on the other hand, registered a 7.31% year-on-year growth last fiscal.

Rising fuel prices, higher interest rates and the slowdown in the economy have been hurting the sales for the past two years.

When asked about the expected growth in cars and UVs, Vikram Kirloskar, president of SIAM, told news agencies, "Not fancy growth but hopefully some moderate growth because there has been some improvement in GDP numbers in recent months."

He, however, declined to give a specific forecast, adding that he expected the sales to rise "more than 0%."

Industry experts said a lot will depend on the outcome of the general elections.

Puneet Gupta, associate director, IHS Automotive Sales Forecasting, said,"There is a lot of pent-up demand in the industry as customers are postponing their buying decisions due to lack of any positive sentiment. Things may improve post elections with the new government."

The growth is expected to be driven by the second half of the year, which is generally the festival season.

Rakesh Batra, partner & national leader - automotive practice, EY, said, "We anticipate PV sales decline to continue for a few months. The market is expected to witness recovery during the second half, and end the year with almost a flat to moderate sales growth. However, a lot depends on the outcome of upcoming elections, economic stability and policy initiatives of the incoming government to drive the industry growth."

According to Abdul Majeed, auto expert and partner, PriceWaterhouse, "The sector is expected to bounce back to its growth momentum either in the last quarter of 2014 or most probably by first quarter of 2015. While there may not be a strong growth, the sector could witness a growth of 3% to 5% for the current fiscal year."

A number of new launches are expected from companies like Honda, Maruti Suzuki and Tata Motors, which is expected to boost the demand.

Passenger car sales declined for the first time in a decade by 6.7% in fiscal 2013 and continued to fall in the last fiscal as well despite some big launches by companies including Ford India, Honda Cars India and Hyundai Motor India.